Cashback Mortgages NZ — Are They Worth It?

Several NZ banks offer cashback payments of $1,000–$5,000+ to borrowers who switch their mortgage to them. It sounds like free money — but cashback deals often come with hidden costs, rate trade-offs, and clawback clauses that can make them less attractive than they first appear.

What Is a Mortgage Cashback?

A cashback is a lump-sum payment made by the new lender when your mortgage settles with them. It’s typically calculated as a percentage of the new loan amount — commonly 0.5%–1.0%.

Example: 0.8% cashback on a $700,000 mortgage = $5,600 cashback

Cashbacks are most commonly offered to:

Borrowers refinancing from another bank (not their own)
First home buyers settling with the bank for the first time

The True Cost: Cashback vs Rate

The most important thing to understand: cashback comes at a cost to your interest rate. Banks aren’t giving away money — they price the cashback into the product. A bank offering a $5,000 cashback on a $700,000 loan will typically offer a slightly higher rate than a bank offering no cashback.

The comparison you need to make:

Option A: Bank with cashback

Rate: 5.65%
Cashback: $5,000
Annual interest (approx.): $700,000 × 5.65% = $39,550

Option B: Bank without cashback

Rate: 5.45%
Cashback: None
Annual interest (approx.): $700,000 × 5.45% = $38,150

Rate difference: 0.20% per year = $1,400/year more with the cashback bank After how many years does Option B save more than the $5,000 cashback? 3.6 years

If your fixed term or clawback period is 2 years, you’re ahead with the cashback. If you stay on Option A’s rate for 4+ years, the cashback costs you more than it saves.

The lesson: Compare total cost (interest + cashback), not just the cashback amount.

Clawback Clauses: The Hidden Risk

Every cashback mortgage comes with a clawback provision — if you refinance away or fully repay the mortgage within the clawback period, you must repay some or all of the cashback to the lender.

Typical clawback structure:

Full clawback if you leave within 12 months
50% clawback if you leave within 12–24 months
Some banks apply clawback for 3–4 years

Example: You accept a $4,000 cashback with a 2-year full clawback. 18 months later, a better rate appears elsewhere. To switch, you must pay back $4,000 (plus the break fee on any remaining fixed term). The cashback becomes a switching trap.

Key questions to ask before accepting cashback:

What is the clawback period?
Does clawback apply if I sell the property and repay the mortgage?
What is the clawback structure — full amount, proportional, or tiered?

Some banks apply clawback for property sales; others don’t. If you’re planning to sell within 2–3 years, be cautious about accepting a cashback with a broad clawback clause.

Current Cashback Offers (Indicative, April 2026)

Cashback offers change frequently. As a general guide, the major NZ banks have historically offered:

Bank	Typical cashback	Clawback period
ANZ	0.5%–1.0% of loan	2–3 years
ASB	0.5%–1.0% of loan	2 years
BNZ	Varies (sometimes flat fee, sometimes %)	2–3 years
Westpac	0.5%–0.8% of loan	2 years
Kiwibank	Varies	2 years

Always check directly with the bank or through your broker for current offers — these change regularly.

When Cashback Makes Sense

A cashback deal is most attractive when:

The rate is competitive — the cashback bank’s rate is close to (within 0.10%–0.15%) the best available rate, so the rate cost is minimal
You plan to stay — you have no plan to sell or refinance again within the clawback period
You need the cash now — the cashback helps cover switching costs, legal fees, or is genuinely needed
The clawback terms are reasonable — proportional clawback over 2 years is manageable; full clawback over 3+ years is a significant lock-in

When to Skip the Cashback

Avoid cashbacks when:

The rate is meaningfully higher than alternatives — even with the cashback, you’ll pay more over the fixed term
You might sell or refinance again within the clawback period
The clawback applies to property sales (very restrictive — you can’t exit the property without repaying)
A broker has identified a much better rate at a bank not currently offering cashback

How to Find and Compare Cashback Deals

Use a mortgage broker — brokers have current knowledge of cashback offers across all lenders and can include this in a total-cost comparison
Ask explicitly when comparing rates — “Do you have any cashback or incentive currently available for refinancers?”
Do the full maths — cashback ÷ annual rate saving = break-even period. If the break-even is within the clawback period, the cashback is likely a net positive. If it’s longer, the rate difference matters more.
Read the cashback terms in writing — don’t rely on verbal descriptions of clawback terms

Cashback and the Switching Process

Cashback is typically paid:

Within a few weeks of settlement, often directly to your bank account
Sometimes into the new mortgage as a balance reduction (check — you usually want it paid to you directly)

Cashback is taxable income in NZ if received in connection with a mortgage for a rental property (deductible income activity). For owner-occupier mortgages, it is generally treated as a capital/non-deductible receipt. Confirm with your accountant if you’re uncertain.